Looking For a Whole Life Policy

[WinoBlues]

When was the last time a prospect asked you the IRR of a policy? Or asked you if you are CLU? Or what the Comdex rating is?

I may run a bunch of illustrations getting ready for a meeting however, Most of my face to face quotes wind up me writing a face amount and premium on the back of the map quest map I ran.

As agents, We tend to get in our own way.

 

[BNTRS]

How is this ridiculous? Please explain further. Or are open ended, non informative sentences your thing?

You really don't think the "if set up correctly" statement is the predicate for here comes some bull#$%^? You sound kind of like a career shop training manual when you write.

We'll dig a little deeper into what you wrote:

Say you have a 401k with $50,000 in it from a previous employer. You can roll that $50k into an IRA even though the IRA yearly contribution limits are $5000 and pay no taxes on the rollover.

This right here might take the cake for the dumbest/most mis-guided statement I've ever seen around here. Your switching between MEC status and taxable status of a distribution is just plain odd. When you 1035 money into a new contract the basis of the old contract is preserved. That, in a nutshell, is what allows for skirting some MEC situations. The only other way to do it is to increase the db, either by base WL db, or using term riders.

Your analogy forgets that a rollover from a qualified plan to an IRA involves a rollover (sometimes referred to as a conduit--but this is rare) IRA. This was important because up until 8 or so years ago, you had to be careful about what you did concerning any additional contributions made to the IRA if you wanted to retain the right to roll the IRA into a different employer plan. The rollover IRA is simply a vehicle for accepting funds. This is a terrible analogy.

I actually do a good many 1035's as most companies policies are dogs.

You reek of NML. But anyway, I want to know what constitutes a dog.

 

[dgoldenz]

You reek of NML. But anyway, I want to know what constitutes a dog.

Anything that's not NML.

 

[Chuckles21]

This right here might take the cake for the dumbest/most mis-guided statement I've ever seen around here. Your switching between MEC status and taxable status of a distribution is just plain odd. When you 1035 money into a new contract the basis of the old contract is preserved. That, in a nutshell, is what allows for skirting some MEC situations. The only other way to do it is to increase the db, either by base WL db, or using term riders.

Thanks for the complement on the statement. So let's get the whole picture as you seem to love just picking a few things out and then taking them out of context. From my previous post: "Here is my analogy, it does not mean they work the same just an easy way to understand it." Wait a second, did Chuckles just say they were not the same??? Your reading comprehension is limited at best.

So let's look at some similarities. So if I have that 401k and cash it out and then take that money and put it into an IRA, what happens? Oh, it means I have to pay taxes on the distribution as I physically had possession of the money and I can only make a $5k/yr contribution. If I roll it over this does not cause a taxable consequence nor does it limit my rollover to $5000.

Now, let's look at cash value. Say i have $50k in a life insurance policy and I cancel the policy and then put that money into a new policy, what happens? Oh it means I have to pay taxes on gains from the distribution as I physically had possession of the money. Also, since this is not a 1035 the dollars are treated differently, aka I wouldn't be able to contribute the same amount, in the policy as it then affects the MEC status. Holy crap, that analogy makes it a little easier to understand. I know Chuckles said previously they are not the same, but man finding something partially similar I can relate to and already understand makes this a whole lot easier.

P.S. You must not do many 1035 exchanges based on your last sentence. See in most 1035 exchanges that I do, I actually right it for a lower death benefit, not higher. Then because of the dollars coming over from the old policy it automatically buys PUA's increasing the death benefit, so no loss there for the client, while keeping the premium lower. Holy crap, did Chuckles just explain a situation where setting up a policy "correctly" to handle a 1035 most efficiently is needed.

Your analogy forgets that a rollover from a qualified plan to an IRA involves a rollover (sometimes referred to as a conduit--but this is rare) IRA. This was important because up until 8 or so years ago, you had to be careful about what you did concerning any additional contributions made to the IRA if you wanted to retain the right to roll the IRA into a different employer plan. The rollover IRA is simply a vehicle for accepting funds. This is a terrible analogy.

You must not understand the meaning for analogy so here you go:

a·nal·o·gy/əˈnaləjē/Noun
1. A comparison between two things, typically on the basis of their structure and for the purpose of explanation or clarification.
2. A correspondence or partial similarity.

Again, reading comprehension.....

You reek of NML. But anyway, I want to know what constitutes a dog.

Most companies I have come up against. Tell me what companies cash value in general beats NML's long term? I really want to hear your answer to this one.

If it is not the best for the client I tell them to keep it. If it makes more sense for them to 1035 it, I tell them that. Each situation is different based on health, age, cash value, etc.

Next time take a few seconds to read and understand the full post before commenting.

 

[BNTRS]

So let's look at some similarities. So if I have that 401k and cash it out and then take that money and put it into an IRA, what happens? Oh, it means I have to pay taxes on the distribution as I physically had possession of the money and I can only make a $5k/yr contribution. If I roll it over this does not cause a taxable consequence nor does it limit my rollover to $5000.

Wrong son, if you take a normal distribution you have 60 days to put it into an IRA to avoid taxes.

Have you ever done a rollover before? Where does the relinquishing company send the check?

Look, if you had made your analogy about taxable status I would have let you go, but you made it vis-à-vis the notion of MEC status, which was a dumb thing to do. I'll come back to your "if set up correctly" comment, what need is there to set up a rollover correctly that would be synonymous with Modified Endowment Contract avoidance? Don't tell me I'm taking things out of context, and then change the context. Again, you cannot predicate your analogy with "if set up correctly" when discussing MEC status and pretend like you were primarily talking about taxable consequences. Perhaps you're just really bad at articulating your ideas, but then even you must be smart enough to go back and read what you wrote and notice the juxtaposition is misguided.

P.S. You must not do many 1035 exchanges based on your last sentence. See in most 1035 exchanges that I do, I actually right it for a lower death benefit, not higher. Then because of the dollars coming over from the old policy it automatically buys PUA's increasing the death benefit, so no loss there for the client, while keeping the premium lower. Holy crap, did Chuckles just explain a situation where setting up a policy "correctly" to handle a 1035 most efficiently is needed.

And now I know you're dangerous. If I buy a 250k db policy and 1035 money into it from an old 250k db policy what's the guaranteed db on the new policy?

Now, if I reduce the db and 1035 to target the db on the old policy what's the guaranteed db? Hint, the < should be coming to mind. I learned that trick several years ago, too. But quickly realized how much I was screwing people and immediately dropped it as a practice before I did any real damage.

Further, what do we know about PUA's? They buy more db when you are younger. You'll have a had time convincing me that even with the super-awesome party in my pants-ness that is Northwestern Mutual you'd be able to reduce a db and re-buy the PUA db on a new policy at NML (at a higher age) and leave your client in an immediately better situation after having a non NML policy for 10 years--and I don't really care if it means your illustration suggests they'll have $5k more in cash value in 30 years. As much as we might not like to admit it, there's a cost to moving money. All of the insurance contracts I'm aware of--even those at precious Northwestern--have load fees on PUAs--in fact NML's are quite high.

You're displayed understanding of the actual mechanics of the contracts your out there trying to sell is just terrible. And no, I don't do a lot of 1035's, for a very good reason.

Most companies I have come up against. Tell me what companies cash value in general beats NML's long term? I really want to hear your answer to this one.

Tell me what mutual funds are best long term, tell me what 401k plans have the best performing investment options long term. Tell me what annuities have the best performance long term. Living by IRR is like living by price. As soon as you have a bad year or two, you're toast. There's more to it than that. So what if NML claims it'll have the most cash in 40 years. 40 years from now, if they were wrong, there's not much I can do about it. This isn't to say no one should own NML, if you sell someone their first WL contract and it's an NML contract, it still has most of the pieces and parts any good contract should have. Are there better options? In my opinion yes, but I'm not going to tell someone they should jump ship because I can illustrate more money in the projected column by the time they are almost dead. Part of the magic of WL is the access to cash why still in the accumulation phase, without losing the leverage that cash has in earning dividends (NDC, DC doesn't much matter they both pay at least some dividends). I'm not going to replace someone's policy on the notion that they'll have more cash knowing full well the new policy has likely higher mortality costs since they are older, and can guarantee that if they are holding onto an old 1980's CSO product, the guaranteed cash will be way higher based on the fact that it's an endowed at age 100 product.


I understand what you are saying, however I'm so sure you do fully.

 

[Chuckles21]

Wrong son, if you take a normal distribution you have 60 days to put it into an IRA to avoid taxes.

Have you ever done a rollover before? Where does the relinquishing company send the check?

No, this is not wrong. Did i ever put a time table on my statement? All I said is that you cash out your 401k and later put it into an IRA. I never said right away I never said 61 days later. I was not going into all the details regarding a 401k rollover because that is not what this discussion is about. It is about 1035ing life insurance cash values.

Look, if you had made your analogy about taxable status I would have let you go, but you made it vis-à-vis the notion of MEC status, which was a dumb thing to do. I'll come back to your "if set up correctly" comment, what need is there to set up a rollover correctly that would be synonymous with Modified Endowment Contract avoidance? Don't tell me I'm taking things out of context, and then change the context. Again, you cannot predicate your analogy with "if set up correctly" when discussing MEC status and pretend like you were primarily talking about taxable consequences. Perhaps you're just really bad at articulating your ideas, but then even you must be smart enough to go back and read what you wrote and notice the juxtaposition is misguided.

He was asking how putting all those dollars into a new contract would not make it MEC. I chose an easy to understand analogy, please go back and look at the definition, about how funding limits can be overcome in certain situations. In this case I used IRA contribution limit along with life insurance funding limits for better understanding.

And now I know you're dangerous. If I buy a 250k db policy and 1035 money into it from an old 250k db policy what's the guaranteed db on the new policy?

Now, if I reduce the db and 1035 to target the db on the old policy what's the guaranteed db? Hint, the < should be coming to mind. I learned that trick several years ago, too. But quickly realized how much I was screwing people and immediately dropped it as a practice before I did any real damage.

I'm sorry but I do this all the time and guess what it actually works. You can't run NML ledgers so how would you even know if it is possible with them or not? So here is how it is done. (look at the attached ledger for clarification) Prospect has a $50,000 universal life policy with say $5000 in cash value. Death benefit isn't rising, cash value not doing what was illustrated, doesn't like that the policy could collapse in on itself down the road, whatever it is we look at replacing it. I write a $30,000 db whole life policy and 1035 over the $5000 in cash. Now with those funds coming into the policy it bumps up the death benefit to a little over $50,000 right away, making it guaranteed. Being a whole life policy this DB is not going to go away in fact it is going to grow with dividends. Plus the cash value is guaranteed to grow and it can't be eaten up by expenses and go to nothing like old universal life policies can. How is this bad for the prospect?

Further, what do we know about PUA's? They buy more db when you are younger. You'll have a had time convincing me that even with the super-awesome party in my pants-ness that is Northwestern Mutual you'd be able to reduce a db and re-buy the PUA db on a new policy at NML (at a higher age) and leave your client in an immediately better situation after having a non NML policy for 10 years--and I don't really care if it means your illustration suggests they'll have $5k more in cash value in 30 years. As much as we might not like to admit it, there's a cost to moving money. All of the insurance contracts I'm aware of--even those at precious Northwestern--have load fees on PUAs--in fact NML's are quite high.

You're displayed understanding of the actual mechanics of the contracts your out there trying to sell is just terrible. And no, I don't do a lot of 1035's, for a very good reason.

Look at the illustration, I prove it right there. Looks like i understand my contracts perfectly. Also you are correct, there is a small cost to moving the money, but it is still in the better of the interest of the client in the long run. You say you don't care about long term projections, so I take it you just tell your clients they are screwed and to live with it?

Tell me what mutual funds are best long term, tell me what 401k plans have the best performing investment options long term. Tell me what annuities have the best performance long term. Living by IRR is like living by price. As soon as you have a bad year or two, you're toast. There's more to it than that. So what if NML claims it'll have the most cash in 40 years. 40 years from now, if they were wrong, there's not much I can do about it. This isn't to say no one should own NML, if you sell someone their first WL contract and it's an NML contract, it still has most of the pieces and parts any good contract should have. Are there better options? In my opinion yes, but I'm not going to tell someone they should jump ship because I can illustrate more money in the projected column by the time they are almost dead. Part of the magic of WL is the access to cash why still in the accumulation phase, without losing the leverage that cash has in earning dividends (NDC, DC doesn't much matter they both pay at least some dividends). I'm not going to replace someone's policy on the notion that they'll have more cash knowing full well the new policy has likely higher mortality costs since they are older, and can guarantee that if they are holding onto an old 1980's CSO product, the guaranteed cash will be way higher based on the fact that it's an endowed at age 100 product.

You are comparing two completely different animals. Life insurance cash value and dividends vs investments. Investments swing wildly up and down all the time both positive and negative. You can't have a negative dividend against a whole life positive. Each year the policy is guaranteed to grow in cash value, as long as you don't take it all out with surrenders and loans. So not sure where your whole "As soon as you have a bad year or two, you're toast." plays into things. Of course you think there are better options, because NML IS NOT an option for you. However you cannot deny their policy performance. Third party pieces confirm it, it is not just a spin that NML puts on.

 

[chinochulo]

Hi All,
have been lurking for a long time and have read through this entire thread and many others. I am not an agent although my Guardian life insurance agent has offered to make me part of his team (obviously benefits him since I work in the medical industry).

I am posting on here because I have some questions I wanted to ask of the agents here and get second opinions (a little bit of buyer's remorse, perhaps)

My policy was effective this May, and the policy premium is split approximately 60% regular premium, 38% PUAs and 2% in riders. I can afford the entire premium now. I am not so sure 10 years down the line with obamacare. My agent told me that I can just stop contributing the PUAs at that time. Another option would be to decrease my death benefit to lower my premium, but my agent says that is not something he would do as a first choice.

My questions:
1) which is better--stopping PUAs until I can afford them again or decreasing the DB?
2) Would decreasing the DB allow me to increase my PUA contribution later? I actually feel like my current DB is too much but my agent says its not even close to my human value or whatever you call it..

I would also like to know which scenario in general provides a higher death benefit for the money--60% base premium + 40% PUA like mine, or a 40% base premium + 60% PUA (or some other variation of this ratio). I was reading through another thread here and the 60base/40PUA split is what another forum member likes to set up with his clients.
More questions:
1) A higher premium purchases a higher death benefit (and hence larger dividends), but at what point does purchasing PUAs on a lower death benefit policy catch up to this higher premium policy?
2) I guess I am not maximizing accumulation of cash value with my current policy, but I do not need the money for at least 10 years. Does maximizing cash value sacrifice long-term growth in any way?
3) Should I have asked for a policy with a lower premium to begin with in order to maximize PUAs without MECing? Is it too late to do this (by lowering death benefit)?

I have already contributed for one year, and I understand that my agent already made a ton of money off me from doing this...

thanks for your opinions..

 

[Larry Tew]

Larry,

Nice to see you still adding nothing to the discussion. Good post by the way.

Hya Chuck. Sorry for the delayed response, but in the time you've spent on this thread defending Northworstern, I placed enough business to pay a year's worth of mortgage payments.

Listen... all kidding aside, I agree that I haven't added anything to your thread. I haven't cared to. I tried to help you understand the difference between how a corporation calculates and pays a dividend versus an insurance company, but you would have none of it. You wanted to talk about revenue being more important than net operating gain, or how an insurance company's strain on reserves from commission advances kill their ability to pay a dividend in any given year. No one will seem to ever bring any value to your threads because no one else can be right in your eyes but you.

The bottom line Chuck is that you know just enough to be dangerous... to yourself and your clients. We all start out that way, but some end up staying that way. There's a big difference between 30 years experience versus one year of experience 30 times.

Threads like these start out useless and go downhill from there.

 

[dgoldenz]

Page 29 upcoming....onward!

 

[arnguy]

Page 29 upcoming....onward!

Enough already! I hope Steve bought the damn policy! Talk about making mountains out of mole hills....